Traders are shopping for a rally in Ascena Retail Group.
OptionMonster’s tracking systems lit up with buying yesterday in the September 21 calls for $0.60 and selling in the September 24 calls for $0.20. About 6,600 contracts traded in each strike.
Buying calls locks in the purchase price of the stock, while selling calls fixes a sale price, so the trader basically owns the $3 spread between $21 and $24. The options can provide some big leverage if the shares are within that price range at expiration because the trader paid only a net $0.40 to open the bullish call spread.
Ascena Retail shares fell last week after earnings missed consensus expectations, and it lost another 2.24 percent yesterday to close at $17.93. That quarterly shortfall, however, was largely the result of costs from the company’s previously announced acquisition of Charming Shoppes.
The specialty retailer — which operates stores under the Dressbarn, Maurices, and Justice brands — also reported an increase in net sales at new stores, strength in locations open for more than a year, and growing e-commerce revenue. Its valuation and balance sheet look reasonable as well.
More than 19,000 options traded in the name yesterday, compared with about 2,500 in an average session. Calls outpaced puts by 3 to 1.
Additional News: Most Retailers Top Sales Estimates for May
Additional Views: Cramer’s Mad Dash: Retail Stocks
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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC’s “Fast Money” and co-founder of OptionMonster.com. Najarian has no positions in Ascena Retail Group.
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